Thermal barrier coating (TBC) structures composed of Al2O3 and ZrO2 with different chemical compositions on the NiCoCrAlY bondcoat are proposed to improve the oxidation resistance of TBC systems. The concept of functionally graded materials (FGM) was applied to manage residual stresses due to sharp interface between dissimilar materials that can lead to a premature failure of the TBC system. A numerical study using finite element analysis was performed to investigate the effects of system architecture on the residual stresses developed in Functionally Graded - Thermal Barrier Coatings (FG-TBCs) and in a typical duplex TBC comprising of NiCoCrAlY bondcoat and ZrO2 topcoat. The effects of different cooling rates and substrate preheating process on the residual stress distribution were also studied. The results showed that lower cooling rate and substrate preheating process reduce stresses within the duplex coating. In addition, the incorporation of Al2O3 interlayer results in a manageable level of residual stress. Stresses at critical locations are reduced, and hence contributing to an increase in resistance to the interfacial crack. The possibility of surface cracks is also reduced since the radial and tangential stresses within the FGTBC system are lower than those of the duplex system. It was found that the thickness of Al2O3 layer and the number of graded layers introduced between Al2O3 and ZrO2 do not significantly affect the stress distribution. To provide adequate comparison to the computational results. X-ray diffraction was used to assess the in-plane residual stresses on the coating surface.